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Andrew Kelvin, Senior Canada Rates Strategist at TD Securities, points out that the US curve has flattened dramatically relative to its global peers, particularly given its very steep starting point four and a half years ago.

Key Quotes

“Considering where the Fed is in its tigthening cycle, we believe that the US curve will continue to flatten at a quicker pace than any other G-10 central bank.”

“Specifically, the US curve has a strong case to be flatter than the Canadian curve at this juncture; we expect that the Fed will continue to tighten more quickly than the BoC going forward, which supports better CAD performance in the front-end of the curve.”

“Going out the belly, CAD-US spreads are already very stretched, which suggests that CAD 10s are likely to follow Treasuries on any sell-off.”